General insurance companies are in for a bumper revenue growth next year as the Fasal Bima Yojna allocation is raised to Rs. 13,240 crores next fiscal, from Rs. 5,500 crores now.
The government today announced increasing coverage under Pradhan Mantri Fasal Bima Yojana to Rs 13,240 crore for the next financial year. The scheme will target to cover 40% of the crop area next year and 50% year after.
As per the current scheme, the government had allotted Rs 5,500 crore under crop insurance for both Rabi and Kharif products.
The government also expects agriculture to grow at 4.1%. The industry saw big push from the government as farmers rushed to cover their crops for both the season after having seen huge claims in the previous two years due to rainfall.
Under the Fasal Bima Yojana, farmer’s contribution towards premium has been decreased to as low as 2% to be paid by farmers for kharif crops, and 1.5% for rabi crops making it possible to include the small and medium farmers to avail crop insurance. Also, the premium for annual commercial and horticultural crops is 5%. Also, non-loanee farmers such as share-croppers are included under the scheme.
Agriculture Insurance Company of India (AIC) and 10 other organisations including ICICI-Lombard General Insurance, HDFC-ERGO General Insurance, IFFCO-Tokio General Insurance and SBI General Insurance are in the empanelled group of insurers.
Also, under the scheme, there is no capping the premium rate and farmers will get claims against the full sum insured, without any reduction.
The response of the scheme has been positive with many states like Andhra Pradesh, Jharkhand, Odisha, West Bengal, Himachal Pradesh, Uttarakhand and Andhra Pradesh have awarded contracts to the insurance companies to provide crop insurance coverage to farmers.
Many drought-hit states have increased fund allocation under PMFBY significantly like Maharashtra has allocated Rs 1,855 crore in the state budget of 2016-17.
GIC and foreign reinsurers receive significant share of premium from crop insurance in India. Pre-agreed formulas are applied to determine sum insured and the related loss in each season.